In 2018, 40% of Eurodollar options trading, 84% of Treasury options trading on the screen
The hit parade continues over at CME Group.
Its markets didn’t need a volatility spike to continue their volume and open interest trends, but CME got one anyway and benefitted, especially in the interest rate options complex. The exchange group already had record electronic daily activity in its interest rate options in January.
On February 6, as market participants were still trying to wrap their heads around inflation concerns and a market selloff, CME Group saw 2.96 million interest rate options trade on Globex. The previous record of 2.43 million contracts was set on January 18.
“If you look at traders and their ability to hedge and balance what they’re doing in OTC markets – it used to be a very, very specific expiration they needed to come into our markets,” Dave Reif, executive director of interest rate products at CME, said. “Now there are so many alternatives in the Treasury and Eurodollar options that a lot more matches up with what they’re doing in other markets.”
The alternatives in question are Wednesday and Friday Weekly options, which coincide with the release of key economic reports. Go back five years and there were just 12 expirations in a year. Now, there are 104.
Not only are there more options to trade, it’s liquid all day.
“Just overnight – let’s say midnight to pit open – we’re trading a quarter million Eurodollar options,” Reif said. “It’s taken a product that was a 7:20 a.m. to 2 p.m. product and it’s given access to customers throughout the world because the liquidity is so good. There are no off-hours now.”
Open interest in the rate options complex is some 54 million contracts, which represents roughly a third of CME’s total open interest.